Planning A Joint Home Loan? Key Things To Consider Before You Apply

Buying a home is a significant financial decision that often includes obtaining a home loan, especially with rising property prices. Most people opt for individual home loans, but applying jointly with a close family member can increase overall eligibility and help share the repayment responsibility. Before applying, it is important to keep a few key things in mind.

When two or more people apply for a loan jointly and split the repayment obligations, this is known as a joint house loan. The co-applicants share responsibility for timely repayments throughout the duration of the loan. Depending on their policies and eligibility requirements, lenders usually give joint home loans to close family members, such as a spouse, parent, or child.

Why Some Borrowers Choose Joint Home Loans

One key advantage of taking a joint home loan is that it can increase overall loan eligibility, as the lender considers the combined income of all applicants. This is particularly useful if you're looking for a larger loan amount. Another benefit is the shared repayment obligation, which may facilitate the burden of monthly EMIs.

Also, suppose both applicants are co-owners of the property and contribute to loan repayment. In that case, they can each claim a tax deduction for both the principal and interest components under applicable income tax regulations.

Key Considerations Before Taking a Joint Home Loan

1. Co-borrower's Loan Eligibility

The lender examines each co-applicant separately. Each factor is considered, including income level, employment, age, and credit score. If any of the applicants has a low credit score or inconsistent financial history, it will affect the loan amount, tenure, and interest rate approved by the lender.

2. Shared Loan Liability

In a joint home loan, all co-borrowers are equally responsible for repaying the entire amount. If one doesn't pay, the other must keep making payments without default. Having shared liability can be stressful and lead to conflict if both borrowers are unclear about their respective roles, expectations, and approaches in the repayment process.

3. Effect on Credit Scores

With a joint loan, repayment activity is reported across the credit profiles of all co-borrowers. Delayed or missed payments damage everyone's credit score, which can lessen their ability to get loans in the future. Even a single missed EMI reflects in the credit history of each individual listed on the loan.

4. Financial Stability of Co-applicants

Joint loans can last a long time, so you should consider the long-term financial circumstances of both applicants. Since joint loans span many years, it is important to consider the long-term financial stability of both applicants. The ability to continuously repay the loan may be impacted by changes in income, a change in job or additional financial obligations. Lenders may also evaluate any such changes during periodic assessments or refinancing requests.

5. Legal and Documentation Aspects

Joint loans require various documentation, including identification, income records, and co-ownership agreements. These documents clearly define each party's legal rights and responsibilities. They also encourage transparency and accuracy and can reduce the possibility of future ownership or repayment issues.